The Entry Fee

Before the government of a developing country can access significant foreign investment or multilateral financing, it typically needs to produce a set of documents demonstrating that it has the institutional capacity, governance structures and reform commitments that the investing parties require. These documents are produced by consultants, usually from one of a small number of large Western firms. They are often billed at rates that they can rarely afford to pay without borrowing, and the borrowing itself is often arranged through the same multilateral institutions whose requirements created the need for the documents in the first place. This roundabout, almost imperial laundering arrangement is not presented as a cost and is sadly presented as assistance to an already burdened nation.

The World Bank spent approximately $1.7 billion on consultant services in the fiscal year ending June 2024, and the firms winning the largest share of those contracts are concentrated in a narrow group of western consultancies, development advisory firms and the consulting arms of the major accountancies. The procurement process through which these contracts are allocated is formally open to firms from any member country, and the Bank’s own guidelines require transparency and competition, but research published in the journal World Development found that success in securing World Bank consulting contracts depends not only on a firm’s technical qualifications but on what the researchers described as “relational labour”, the informal investments in relationships with task team leaders, country directors, and procurement officials that large, established firms are better positioned to make simply because they are already large and already established. A domestic consulting firm in Ghana or Bangladesh competing for the same contract is competing against an opponent whose competitive advantage is partly built from having won previous contracts of the same kind, a circularity that the procurement rules appear designed to not notice.

The problem is not only that the fees for these services flow out of developing countries rather than remaining in them, though that in itself is a very significant sum running into billions of dollars. The deeper problem is what the requirement for external certification does to the relationship between a developing country government and its own institutional knowledge. When a ministry hires a McKinsey team to produce a strategic plan that the government will then present to a donor or investor as evidence of its readiness, the knowledge that goes into that plan, the analysis of the country’s specific conditions, constraints and opportunities, passes through a foreign intermediary that will charge for the service, retain the intellectual property in its own knowledge management systems, and leave the ministry without the capability to produce the next plan independently, making the next engagement with the same firm or a similar one close to inevitable. This is not conspiracy but logical design. It is the ordinary logic of a market in which expertise is treated as a product to be purchased rather than a capacity to be built, and in which the purchasing power and the certification authority both belong to the same set of institutions whose headquarters are in Washington, London and Zurich.

The structural adjustment programmes that the IMF and World Bank attached to their lending from the 1980s onward are the most extensively studied version of this dynamic. Research by Alexander Kentikelenis and colleagues, published in the American Journal of Sociology, found that the structural conditions in IMF programmes, specifically the requirements for privatisation, price deregulation and reductions in public sector employment, damaged the bureaucratic quality of the states they were applied to. This further reduced their capacity to regulate the economy in the interest of their own populations and made them more vulnerable to the capture of public institutions by private interests. The IMF’s own retrospective assessments have acknowledged that the Asian financial crisis conditions of 1997, which required Indonesia, Thailand and Malaysia to pursue tight monetary and fiscal policy simultaneously at a moment when they needed the opposite, turned what might have been a manageable regional downturn into a severe recession with unemployment consequences that the affected populations bore for years. The institutions that gave it faced no consequence for being wrong, and the countries that followed it were not in a position to refuse it because refusal would have meant losing access to the financing they needed to keep their economies functioning.

What made these conditions additionally costly was that their implementation consistently required external advisory support. A government required by IMF conditionality to restructure its public sector, privatise its utilities and redesign its tax administration simultaneously needed help managing all three processes at once. Who but the already prepared consulting firms whose experience of implementing such programmes in other countries gave them a competitive advantage could be chosen? They were chosen over domestic advisers who had never worked on a programme of that kind because no previous government had ever been required to implement one. The expertise was genuinely useful in the narrow technical sense. The question is of whether it served the interests of the country being advised as opposed to the interests of the institutions that mandated such steps from outside borders.

The Bretton Woods institutions were never designed to be neutral. They were created at a 1944 conference dominated by the United States and the United Kingdom at a moment when most of the countries that are now their largest borrowers were still under colonial administration. These nations had no seat at the table where the rules were written. The weighted voting structure that has governed both institutions since their founding gives the United States an effective veto over major decisions. There remains the tradition by which the World Bank is always led by an American and the IMF is always led by a European, while unofficial, has also held without interruption since 1944. The advice these institutions give, and the advice they commission from private consulting firms to supplement their own capacity, emerges from a set of assumptions about what good economic governance looks like. These assumptions are were developed primarily in high-income countries with very different histories, institutional inheritances and resource endowments from the countries being advised. The track record of that advice, measured in growth outcomes, poverty reduction and institutional quality over the decades is rather questionable.

The private consulting firms that orbit these institutions and feed on their procurement budgets have their own interests that are rarely aligned with those of the countries their advice is ostensibly meant to help. A consulting engagement that builds the client’s capacity to solve its own problems is one that does not renew. Firms don’t win these contracts by giving good advice, they win by already knowing how to navigate the Bank’s own paperwork and processes, and each contract makes them better at that paperwork than the homegrown firm, locking them in further. A Kenyan firm with deep knowledge of Kenyan agricultural systems, Kenyan land tenure law and the specific political economy of Kenyan smallholder farming competes for a World Bank contract on agricultural reform against a Washington-based consultancy whose advantage is not knowledge of Kenya but knowledge of World Bank procurement. The contract evaluation criteria, however formally neutral, tend to weight the second kind of knowledge more heavily than the first.

The cost of this arrangement to developing countries is not only financial, though even the financial cost is substantial. In 2022, the UK government paid up to £1 million per day to Deloitte for work on a Test and Trace programme later described by its own Public Accounts Committee as one of the most wasteful public spending exercises in British history. The UK has considerably more fiscal room to absorb that kind of loss than a government whose entire health ministry budget is smaller than Deloitte’s monthly invoice. The less visible cost is institutional. When governments consistently outsource their strategic thinking to external advisers, they do not develop the internal capacity to evaluate the advice they receive. This means that they become less capable of identifying when the advice is wrong, which means they become more dependent on external advisers to tell them what went wrong and what to do next. Each engagement that fails to build internal capacity makes the next engagement with the western firm more necessary and the government’s own institutions less relevant. The small circle of firms winning those engagements have a structural interest in that cycle perpetuating because it is what produces their revenue.

This is the entry fee that the world calls technical assistance, capacity building, reform support or advisory services. The countries paying it call it necessary because the institutions requiring it have made it a condition of access to financing they need. The firms collecting it call it expertise because the procurement documents say that expertise is what is being purchased. What is actually being transferred, in many of these arrangements, is the legitimacy that a western firm’s name confers on a document that will be presented to other western institutions as evidence that the country in question is ready to be invested in. This is a service whose value to the purchasing government is real but whose value to the country’s population is considerably harder to establish.

The Gaze looks at the systems behind representation to the complex histories, commercial interests and political arrangements that shape which stories the world tells about which peoples, and why those stories so rarely originate with the people inside them.